The cloud is a simple concept, at least in theory: use your internet connection to connect to your applications from wherever you are, whenever you want. Almost everything people use on their computers nowadays – Spotify, email, Netflix, Dropbox, etc. – is cloud based. I’ll use Spotify to illustrate the components of the cloud and how it works. Users download a client that connects to a server (for example, the Spotify icon on your desktop loads the Spotify client). The reason you can access all of your saved playlists and recent song history is because of the components of the “cloud” – all of which is managed by Spotify. In short, Spotify manages the servers that contain the Spotify software allowing users to run the program, the databases that contain user information such as login credentials and song history, and the storage which holds all of the content. That’s why the cloud is so appealing to both individuals and businesses – users have nothing to worry about (until the servers go down), and businesses can charge a subscription fee which generates more revenue for them in the long run.

But what about the cloud for enterprises, how does that work?

The cloud works very similarly for large enterprises as it does for small business and individuals. An example of enterprises using a cloud service, and a surprising recent trend, is hosted email. Microsoft launched Office 365 one year ago, and several companies have and are making the transition to a cloud based email environment. This means enterprises are foregoing maintaining their own servers and storage, and paying a premium for a company to take that burden off of their shoulders. Enterprises now do not need to worry about purchasing hardware, troubleshooting software, hiring additional IT staff or unpredictable costs (such as upgrading their hardware or buying additional storage). This is the same concept behind on-premise archiving vs. cloud archiving – going cloud removes the hassle of maintaining your own archive.

If going cloud is so great, why are enterprises considering staying on-premise for archiving?

There are a multitude of reasons enterprises aren’t jumping on the cloud bandwagon. Financially it can make more sense – you will save money in the long-run. Typically, on-premise solutions require an upfront cost while cloud solutions have a subscription model. It’s similar to purchasing a car; if you buy it in cash, it saves you money in the long-run as compared to leasing the vehicle. Additionally, E-Discovery can become extremely expensive due to the migration costs that cloud solutions charge. I recently spoke with a director of E-Discovery from a top-5 pharmaceutical company that was charged $20/GB to export their data into a review tool. At an average of 500 GB/case, they were paying an additional $10k/case – multiplied by 50 cases a year and they spent $500k in unnecessary E-Discovery costs. Reliability is another reason – if something with the servers goes wrong, you must wait on your provider to fix the problem. The email platform and archive are two of the main components of a business’s operations. If the email or archive servers go down, it could take anywhere between hours and days to get them up and running, which in turn could cost the business hundreds of thousands of dollars. Lastly, control of your data is arguably the most important factor – if you use a cloud solution to host your data, ultimately that data is your provider’s possession. Under the Patriot Act, the government has access to any information held in the cloud, which doesn’t sit well with some large enterprises, especially if they have sensitive information (such as financial institutions or healthcare companies). The other issue is what happens when you pull that data out. Enterprises regularly move to other providers, platforms or services. Unfortunately, it can be extremely costly for organizations to migrate their data out of the cloud (potentially as expensive as the service itself) since they rely on their provider to release their data.

So which enterprises should go cloud and which should stay on-premise?

It depends who you are, how big you are, and what goals you want to accomplish. If you are a large corporation with thousands of employees, a healthy IT department, terabytes of data, and require data reliability, then staying on-premise would probably be the best route for you. On the other hand, if you are a small company, do not have a large IT department, do not have capital for a large upfront investment, and are not overly concerned with data reliability, then cloud might be the best option.

So now that you understand what the cloud is, how it works, and how it could affect your business, what option are you going to go with?

I am passionate about the intersection of business and technology. Having worked in both finance and technology, I understand how software can impact a company's bottom-line. Being in an account executive position with ZL allows me the privilege to interact with high-profile companies and their executives, providing invaluable insight into what truly matters to businesses. I will be covering topics that directly impact leading corporations, using as many pertinent use-cases as possible. Follw me @Ross_Rubinchuk for tweets and insights.